During the pandemic: record deposits of Lithuanian companies in banks

It also grew during the pandemic.

Paulius Morkūnas, Chief Economist of the Macroprudential Analysis Division of the Bank of Lithuania, explained to Delfi that, in general, corporate deposits in Lithuania have increased since 2004, and their decrease was only in 2008, during the financial crisis.

This year, even as the world battles coronavirus, it is no exception. While at the beginning of 2020, in January, corporate deposits totaled $ 6.67 billion. Eur, its growth continued to be recorded. In March, after the quarantine was announced in Lithuania, the amount of deposits amounted to 6.87 billion LTL. EUR, 6.99 billion in April. EUR, and in May it increased to 7.21 billion. EUR. In June, the companies had a total of $ 7.4 billion in banks. Deposits in euros, and in July – 7.67 billion. EUR. In August, that number jumped to 8.05 billion. EUR, and in September and even increased to 8.09 billion. EUR.

“Since the advance of COVID-19 cases in Lithuania, that is, in March-September, corporate deposits have increased by around 1.4 billion. EUR and exceeded 8 billion for the first time. EUR. For example, in Compared to the average growth of corporate deposits in the corresponding period of the previous 3 years (March-September), this year the indicator is even 6 times higher. Such rapid growth has led to the fact that corporate deposits have almost exceeded the amount of its loan portfolio to financial institutions ”, commented P. Morkūnas on the growth of deposits.

The fact that corporate deposits increased during this period, he said, may be due to several factors.

“First of all, most of the deposits are considered in the form of demand deposits, or in other words, funds in accounts.

For example, statistics show that in the second quarter, when deposits grew rapidly, corporate indebtedness with suppliers decreased, as did loans to other companies. This means that there has been a movement of money between companies. However, if this money is not converted into term deposits, their form does not change and they are deposited into checking accounts. Second, the increase in corporate deposits may also be related to the fact that companies delay investments or the purchase of non-urgent equipment.

With a high degree of uncertainty, it is normal for companies to want to feel more secure and have a financial cushion for critical moments. Third, the increase in company accounts could also have been affected by certain aid measures, ”said the economist, noting that tax arrears and tax loans, for example, amount to almost € 1 billion.

Thus, these funds could be used to pay urgent liabilities to other companies, which contributed to the increase in deposits. Still, it is important to realize that both tax loans and arrears will need to be repaid. Therefore, stagnant growth of deposits is possible in the future, depending on the profitability of the companies and how the tax obligations will be repaid.

It is true that it would not be appropriate to put all companies in one basket: if some did better or adapted quickly to the changing market situation, for others support measures were vital and allowed them to quickly direct their participation to the places where it was most painful at the time, how to settle scores with employees. , suppliers, ”explained P. Morkūnas.

Called the all-time high

Economist Alexander Izgorodin also pointed out that the amount of corporate deposits in September is a real and maximum historical record, and such amounts of corporate deposits have never existed in Lithuania before.

“I think there is only one reason that has led to such an increase in corporate deposits. The fact that deposits are growing so strongly indicates a fairly high level of uncertainty in the corporate segment.

In the first quarter of this year, when we did not have the COVID-19 crisis yet, Lithuanian companies had a record amount of retained earnings. I think the money that was earned before COVID-19, that was actually earned, some of it was spent on business support and some, even more, was simply put into bank deposits as companies slowed down investment, slowed down development and consequently I had to think about what to do with that earned money. Nobody wanted to take risks, so companies stopped investing, which led them to temporarily put that money in the banks and now they are waiting for what will happen next ”, commented the economist.

According to him, two main risks were seen here: a pandemic and the US presidential elections.

“There were two aspects of risk that prevented the business from expanding.

The first is the American presidential election, because it directly affects Lithuania through trade wars, through political rhetoric, because our economy is open, companies are waiting for what will happen next, what will be the future relations between Europe and United States. And the second thing, of course, is the increase in COVID-19 cases, “said A. Izgorodin.

They presented their ideas

Swedbank Chief Economist Nerijus Mačiulis also spoke about growing corporate deposits a little earlier.

“A large number of companies, with serious problems: neither liquidity nor solvency, demand, they did not face each other. We see several sectors: accommodation, catering, leisure, entertainment, that will have big problems, even among them there are some that are prospering, for example, employment in Lithuania’s tourist cities is at a record this year. No special help is probably needed, but the industry is still badly damaged.

As I said, looking at corporate finances, it would be difficult to see that Lithuanian companies are going through a crisis, at least the total number of their deposits has increased by 6 billion. up to EUR 8 billion. Of course, the very vulnerable sectors that I mentioned, which receive less income and have fewer reserves, remain, but the financial situation of many companies is still very good, even better than a year ago, and their loan portfolio, which has fallen About a billion, is largely due to He borrowed those billion from STI and Sodra because the tax license was granted. There are companies that have had a record year ”, he commented.

However, the economist attributed the growth in corporate deposits primarily to both the STI and Sodra temporary tax breaks and the growth of retail trade.

“One billion euros is what STI and Sodra allowed to avoid paying taxes and what is in the accounts of the companies. Retail trade reaches record levels since the summer, residents cannot travel abroad, they spend money in Lithuania, those who have been on vacation on the Mediterranean coast, today are on vacation on the Baltic coast, farms, resort cities, that’s why the money stays in Lithuania.

Exports of some companies also reach record levels. Goods for which demand has not decreased during the pandemic are produced, including food and furniture.

Plus, let’s face it, the state has borrowed more than $ 2 billion. Eur, or maybe more, I no longer know the latest numbers, but that money is not in the state accounts, it revolves around the economy, “he said.

Residents also saved more

The LB economist P. Morkūnas also assured that the situation of household deposits is currently very similar to that of companies.

According to him, household deposits have also been growing almost continuously since 1994 and into the last decade of 2020. September. According to the data, the deposits of the Lithuanian population already amounted to about 16.6 billion. EUR.

“The quarantine has not stopped the growing trend of deposits: household deposits in banks have been in effect since March. It increased by about 1,400 million. Eur, which is almost 3 times more than the average of 2017-2019. March- September

The fact that the population has accumulated funds more quickly may be due to several reasons. First, residents tend to have liquid contingency funds. This was also shown in 2020. LAC Household Survey Results.

For example, in 2008-2010. After the financial crisis, the savings rate increased and approached the EU average, but as the economic situation improved, savings in Lithuania were again postponed; In recent years, Lithuania’s savings rate was one of the lowest in the EU.

In addition to these reasons, the growth of the average salary contributes to the maintenance of the stability of the financial situation of the population, which, according to the Bank of Lithuania in September forecast for 2020 should reach about 7%, as well as state aid measures to help preserve employment and income. Also, this year is unique in that due to the current situation, people spend less money on entertainment: more trips are delayed, there are fewer visits to entertainment venues and events. Without a doubt, part of the money that would become expenses in the event of a non-pandemic would also end up in the pockets and deposits of the population, ”he said.